Informal traders play a big role in S.Africa’s economy

The informal sector contributes around 29 per cent to the country’s gross domestic product (GDP). PHOTOS: Cape Town Partnership/Flickr

This is according to panellists speaking at the Consumer Goods Council of South Africa (CGCSA) Summit 2014, on the importance of small and medium enterprises (SMEs) including informal businesses.

Dr Mlenga Jere, a senior lecturer at the Graduate School of Business, pointed out that research conducted in 2010 by non-profit organisation Finmark Trust indicated that there are around six million small businesses in South Africa, with the majority of them being informal.

Seventy-nine per cent of small businesses are in the retail sector while 21 per cent are in services-related sectors.

“SMEs offer over 11.6 million employment opportunities. They are a significant player that we need to pay attention to,” said Jere.

However, according to a survey he conducted of 18 participants from small business support institutions and 26 from the small-scale business sector, this industry continues to face a number of challenges.

SMEs suffer from a lack of financial support and access to markets, an increase in competition and consumer demands, skills shortages and an unsustainable business model.

“We need to talk a lot more to these business people so they can evolve. We need to get small business owners and informal traders to discuss with big institutions their challenges and how to overcome them,” he explained.

James Sibeko, managing member of Jabatha Paper & Stationery added that informal traders don’t think out of the box.

“Currently the status quo with SMEs or informal traders is that they sell products in one street to the same market and don’t think of collaborating, creating better prices and selling as one large shop,” he explained.

He said that education is therefore important in order to get small-business owners to implement better, more effective business models.

“Some businesses grow their companies to a point where it is only viable to look after their families; they don’t take into account expansion strategies and creating more jobs for others.”